HARDSHIP RULES FOR BORROWERS

With the mining boom winding down there has been a surge in people losing their jobs or being made redundant. Many of these people have mortgages and when they lose their jobs they are unsure of their rights with regards to not being able to meet their mortgage payments.new-home-owners-grant-rise

The good news is that there are avenues for borrowers which will enable them to take action to survive these periods of unemployment without going into default on their home loan or even losing their house.

Since 2013 there have been measures put into the Federal legislation governing Credit that help borrowers facing these circumstances. These measures fall under the category of “Hardship Provisions” within the legislation.

What this basically means is if a borrower believes that they are unable to make their mortgage payments then they need to approach their lender and request assistance under the hardship provisions of the legislation.

Under the legislation the onus is on the bank to provide assistance to the borrower and there are a number of options the lender can provide to assist the borrower. They include the following:

1.       Up to 12 months freeze on having to make mortgage repayments and the interest can be added to the loan.

2.       An extension to the term of the loan and a reduction in the amount of the monthly mortgage payment. For example, a loan might be extended from 30 years to 35 years and the amount of the mortgage payment will be significantly reduced.

3.       Interest only breaks on loan repayments. For example, borrowers are allowed to pay interest only on their home loan for a set period of 5 years.

4.       Fee waivers.

So if a borrower has an issue with not being able to meet their mortgage payments then there is a solution and the solution needs to be applied as soon as possible. It is very important when someone believes they may not be able to pay their mortgage that they contact their lender as soon as possible.

All lenders now have staff whose job it is to deal with Hardship cases. Once contact is made then the borrower is invited to a local bank branch to meet with the hardship officer and an appropriate plan is put in place to help the borrower get through this difficult time.

Once the plan is put into place the lender will monitor it and keep in close contact with the borrower. Once the borrower is able to resume full mortgage payments to the bank then the lender can transfer the borrower out of the hardship program and put them back into the normal servicing area of the bank.

So it can be seen that the hardship provisions of the legislation provide a way for the borrower and the bank to deal with any circumstances affecting the borrower without serious consequences for the borrower such as losing their house.

 

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